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Payment Options

When you become eligible to receive your retirement benefit, you can choose from several payment options available to you.
FRS Pension Plan FRS Investment Plan
There are four payment options:
  • Option 1 is a single life annuity option, which provides a monthly benefit to you for your lifetime. When you die, the monthly benefit will stop and your beneficiary will receive only a refund of the contributions you paid, if any, that exceed the amount you received in benefits.
  • Option 2 provides a reduced monthly benefit payment to you for your lifetime. If you die after 10 years of retirement, no benefits are payable to your beneficiary. However, if you die within 10 years (120 months) after you retire, your beneficiary will receive a monthly benefit payment in the same amount you were receiving for the balance of the 120-month period from when you started receiving benefits. After that time, no further benefits are payable.
  • Option 3 provides a reduced monthly benefit payment to you for your lifetime. Upon your death, your joint annuitant* will receive a lifetime monthly benefit payment in the same amount as you were receiving. No further benefits are payable after both you and your joint annuitant die.
  • Option 4 provides an adjusted monthly benefit payment to you while both you and your joint annuitant* are living. Upon the death of either you or your joint annuitant, the monthly benefit payment to the survivor is reduced to two-thirds of the monthly benefit you were receiving when you both were living.
  • Both Option 3 and Option 4 provide that upon the death of the member, a joint annuitant who is under age 25 will receive the amount of the Option 1 benefit until age 25, at which time the benefit terminates. A disabled joint annuitant will continue to receive the benefit for the duration of the disability.

Each of the payment options above includes a 3% annual cost-of-living adjustment payable each July 1 (adjustment only applicable for FRS service earned prior to July 1, 2011).

When you leave FRS employment, you can choose to keep your benefit invested in the plan until age 73 - when mandatory distributions must begin, unless you are still working - or have it distributed in one of the following ways:
  • Lump-sum direct rollover distribution to another qualified plan or to an IRA.
  • Periodic distributions as authorized by the State Board of Administration.
  • A fixed annuity you can purchase, which would guarantee you payments for your lifetime and, if desired, provide for a 3% annual cost-of-living adjustment. These annuities can also be structured with the Option 2, 3 or 4 features available in the Pension Plan. You can choose monthly or other payment periods. (See Make Your Money Last a Lifetime.)
  • Deferred annuities that allow you to make an initial premium payment during retirement, but defer collecting regular guaranteed payments until later in life (e.g., age 70). See Make Your Money Last a Lifetime.
  • Lump-sum cash distributions payable to you (see Taxability of Benefit section)
  • Any combination of a partial lump-sum payment and a partial annuity or rollover.
* Your joint annuitant is considered to be your spouse, your natural or legally adopted child who is either under age 25 or is physically or mentally disabled and incapable of self-support (regardless of age), or any person who is financially dependent upon you for one-half or more of his or her support, and is your parent, your grandparent, or a person for whom you are the legal guardian.